Can We Legally Hire Outsourcing Employees on Flat Pay Without Benefits or Contracts?

Hi all,

Is it possible to hire employees for an outsourcing job with a flat pay (no HRA, DA, PF, etc.)? They will be hired for a fixed term period. Are there any legal binding obligations to this? How do we maintain the employer's books for contract jobs?

Also, is there a possibility of hiring people without being on contract and just giving them a fixed pay without any breakdowns or other benefits?

Consolidated Salary and PF Considerations

There is no issue if you pay your employees a consolidated salary (salary without any bifurcation and incremental scale). However, you cannot include the PF in it. PF should be calculated from that salary separately. If the flat salary offered is Rs 15,000, pay PF Rs 1,800 in addition to it, calculated at the rate of 12% of Rs 15,000. Similarly, pay ESI in addition to the salary. When the employee leaves the company after 5 years (even with a break in service of one or two days after each fixed-term contract), pay gratuity based on this Rs 15,000.

Salary Bifurcation Practices

Employers bifurcate salary with small compartments like Basic, HRA, Conveyance, Special allowance, etc., just to limit their contributions to PF, Gratuity, etc., on the basic salary. Though this practice is wrong, with the clarification of the Supreme Court on basic wages for PF, employers are experimenting on the wages and its structure to find out which all elements would not constitute wages/salary.

In short, salary means the total sum payable as per the contract of employment, and there is no rule that you should bifurcate it into basic, HRA, etc.